Has your credit score gone down?

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Why has my credit score gone down?

Credit scores fluctuate all the time, but noticing a drop can understandably cause concern. We take a look at the most common reasons why your credit score might have gone down.  

In This Guide:

Why is my credit score so low? The Finances

Let’s start with the obvious: the finances. Much of your financial history will show on your credit report, the good and the bad. What’s the bad? Well, it can be various things. First, if you’ve missed repayments on loan or debit, it’ll show on your report. Getting a repayment plan that works for you is imperative for keeping on top of your debts, which is why running a loan comparison first can help you find a deal that’s affordable for you.

If you have an account that’s gone into arrears, or your debt has been passed onto a debt collection agency, then this’ll have a negative impact on your score when it’s added to your report. Furthermore, any County Court Judgements or Individual Voluntary Arrangements will bring your score down as lenders deem you too risky considering you’ve danced with the devil of debt in the past.

Declaring bankruptcy has the most severe impact on your credit score, closely followed by foreclosure, which is when your house is repossessed by your mortgage lender if you’ve been unable to keep up with payments.  

Why has my credit score dropped? Account Activity

Many loans and mortgages demand a hard credit check is carried out. This is a serious review of your credit history to determine your suitability. Too many hard credit checks suggest to lenders that you frequently apply for loans and have an over-reliance on credit. While occasional hard credit checks are unavoidable, over-searching will negatively impact your score.

You could also see a drop in your credit score if you close an old account. Why? Well, you have a credit age, which is essentially the length of your credit history. Your old account is extremely formative as it shows your activity over an extended period of time. Closing an old account means there’s less of an overall picture of your credit history; some lenders view this negatively.

Furthermore, financial connections to other people will be shown on your credit file. Therefore, if you’ve got a joint bank account with your partner, their credit history will affect yours and vice versa, for better or for worse. So, even if your score is great, you could find it’s brought down by your partner’s. This’ll also be the case if you’re a guarantor for someone.

Why has my credit score gone down? The Admin

It may surprise you, but credit scores can fluctuate for reasons not directly related to our finances. Changing your address frequently can cause your credit score to drop, as it (often unfairly) suggests instability to lenders. Even if you’ve just moved house for the first time in years, for this reason you could see your credit score go down. However, this can be remedied by ensuring you regularly update your address on the Electoral Register.  

We also recommend you frequently check your credit report for any errors. While it’s not hugely common, mistakes can happen and inaccurate information could be pulling your score down. What’s more, errors could be a signifier of identify fraud, so it’s important you regularly review your file and report any inaccurate information to all three Credit Reference Agencies immediately.

How can I improve my credit score?

All of us want a great credit score, so here are a few ways to improve yours:

  • Pay your bills and debts on time
  • Don’t apply for more credit than you need
  • Ensure you’re on the Electoral Register
  • Consolidate your debts to keep on top of payments

If you’d like to read more on how to improve your credit score, for example if you’re looking for cheap loans or want the best rates on a mortgage, we’ve got a whole guide dedicated to it.

Can I still get a loan with a low credit score?

If your credit score has gone down, don’t worry. You can still be approved for loans. The best loans are often reserved for those with excellent credit scores, but depending on your rating that doesn’t mean you’re sworn off being able to get a loan altogether, it might just cost you more. Compare loans with us here at Money Expert to see what rates you could get.